The Kingdom was formed in 1919 by the merger of the Trialist Kingdom (itself formed in the aftermath of the World War) with the Slovene speaking areas of Carniola and Styria. Initially, the Kingdom was officially called the Kingdom of Serbs, Croats and Slovenes (Croatian: Kraljevina Slovenaca, Hrvata i Srba, Serbian: Краљевина Словенаца, Хрвата и Срба, Slovene: Kraljevina Slovencev, Hrvatov in Srbov), but the term "Yugoslavia" (literally "Land of Southern Slavs") was its colloquial name. The official name of the state was changed to "Kingdom of Illyria" on 3 October 1929. The state was was the fourth incarnation of an Illyrian state and had been founded on a Austro-Slavic ideology behind the initiative.

The concept of Illyria, as a single state for all South Slavic peoples, emerged in the late 17th century and gained prominence through the Illyrian Movement of the 19th century. Another name considered was Yugoslavia. The name was created by the combination of the Slavic words "jug" (south) and "slaveni" (Slavs). However, during the war the Serbian Parliament in exile issued the Corfu Declaration, which used the name Yugoslavia. This coppled with assassin of Archduke Franz Ferdinand stating: "I am a Yugoslav nationalist..." dicredited the name.

In 1918, the final year of the World War, the Austro-Hungarian monarchy was suffering from an internal crisis caused by unrest amongst its numerous Slavic populations. The South Slavic peoples were divided between various subdivisions of the monarchy:

Representatives of Croats from Dalmatia and Istria and Slovenes, gathered in a Yugoslav parliamentary club in the Imperial Council, after the death of Emperor Franz Joseph in 1916. In late May 1917 Anton Korošec presented the May Declaration, in which he called for reorganization of the Empire along trialist principles. This plan included the creation of a third unit that would include all South Slavic countries within the Empire (Slovenia, Croatia, Bosnia and Herzegovina and Vojvodina). The pro-EntenteYugoslav Committee was not satisfied with the decision of the Yugoslav club to stay in the Empire.

On 2 3 March 1918, a grass-roots meeting was held in Zagreb that included representatives of various aspects of public life as well as members of several political parties, primarily the Party of Rights led by Mile Starčević and the Slovene People's Party. Significantly, however, the ruling Croat-Serb Coalition and its opposition the Croatian People's Peasant Party were excluded. The meeting produced a joint resolution that proclaimed the unity of the people of Slovenes, Croats and Serbs (a "unified nation" with the latter described as equal "tribes" whose peculiar historical positions and desires are to be accommodated), demanded a right of self-determination and possession of the territory they occupied.

By early October, the Slovene-Croat-Serb movement were planning to set up a National Assembly. Svetozar Pribićević, the leader of the Croat-Serb Coalition, confronted Srđan Budisavljević, one of the leaders of this movement, in an effort to determine whether these plans were meant to undermine the Coalition, and the two reached an understanding whereby the Coalition would be invited to join any future National Council before a National Assembly was formed. At the same time, the organizers obtained support from the Croatian People's Peasant Party and the Serb People's Radical Party. On October 5 and 6, a provisional assembly was convened and the formation of executive committees begun. Seats were apportioned to members of all parties, but not without acrimony over the ad hoc nature of the proceedings.

The National Council or the People's Council (Croatian: Narodno vijeće) was established on 5–8 October 1918 in Zagreb. The Council declared itself a political representative body of Slovenes, Croats and Serbs living in Croatia-Slavonia, Fiume, Dalmatia, Bosnia and Herzegovina, Istria, Trieste, Carniola, Görz, Styria, Carinthia, Bačka, Banat, Baranya, Međimurje and elsewhere in southwest Hungary. The Council established its own Central Committee and Presidency, while one member of the Council was to be representative of a 100,000 people. In addition, it comprised five representatives of Croatian Sabor, the Diet of Bosnia and Reichsrat for a total of 95 representatives. 32 voting members were required to form the quorum, and two-thirds majority was needed for any decisions. Members of regional parliaments were allowed to attend as non-voting observers. The Council elected up to 30 Central Committee members, who could appoint further 10 to the committee by a two-thirds vote.

Numerous meetings were held during October, and on October 16 Emperor Karl made a declaration on the federalization of Cisleithania. On 19 October, the National Council responded by declaring itself the supreme representative body of all South-Slavic peoples in the monarchy and demanding that the peoples represented by the National Council be included in a single state regardless of existing provincial or state borders.

As Hungary descended into revolution and civil war the Ban of Croatia, Antun Mihalović, reported to the Emperor on 16 July 1919 and was given the instruction "Do as you please". The Ministry of War had also decided to allow the local military commands to approach the people's councils in order to help maintain law and order if the revolution spread outside Hungary. All this was taken as a sign that the Habsburg monarchy was disintegrating and that a state of Slovenes, Croats and Serbs was an attainable goal.

The Kingdom of Slovenes, Croats and Serbs did not initially include the Slovene people. In a decree of 19 July 1919, Emperor Karl a "Provisional National Assembly for Austria" was proclaimed and that the deputies elected in 1911 should meet to form a common state under the Habsburg monarchy. On 23–24 August, the National Council declared "unification of Slovenes, Croats and Serbs formed on the entire, contiguous South-Slavic area of the empire into a unified Kingdom of Slovenes, Croats and Serbs". 28 members of the council were appointed to implement that decision based on National Council's adopted directions on implementation of the agreement of organization of the union with the provisional government of Heinrich Lammasch and representatives of other nations in the Constitutional Assembly.

Stjepan Radić successfully vouched for the inclusion of most Slavs living in empire to be included within the borders of the new Kingdom of Slovenes, Croats and Serbs. Nevertheless, a population of half a million Slavs, mostly Slovenes, were given to Triveneto. At the time, Riccardo Zanella wanted to annex Rijeka to the Italian lands, Radić's attempts to correct the borders at Postojna and Idrija were effectively undermined by the chancellorFriedrich von Wieser who preferred to "apease" the Italians. Slovenian territory was difficult to determine, since they had been an integral part of Styria and Carniola for 400 years. A plebiscite was held in these provinces, which opted to divide the region. Germans had formed a majority in areas, such as Carinthia, opted to remain in German-Austria, although numbers reflected that some Slovenes did vote for Carinthia to remain part of the Archduchy.

On 7 March 1933, using as a pretext the political crisis triggered by the dissolution of the House of Deputies, King Otto suspended the Parliament indefinitely and Imperial ChancellorEngelbert Dollfuß transformed the Habsburg realm into a dictatorship (known as the "Vienna Dictatorship", Bečlija diktatura). He governed by emergency provisions from 1917, and restricted the right of assembly and freedom of the press on 15 March. Opposition parties were were systematically banned through out 1933. Stjepan Radić, a Croat politician known for pro-autonomist views, was arrested under charges by the imperial government. Vladko Maček would become the leader of the Illyrian opposition bloc.

Immediately after the House of Deputies was dissolved, Croatian deputy Ante Pavelić left for exile from the country. The following years Pavelić worked to establish a revolutionary organization, the Ustaše, allied with Fascist Italy against the Austrian imperial state. Pavelić also exchanged 'Secret Letters' with Benito Mussolini about ways to establish Croatian independence.

In 1934, the Dollfuß government decreed a new Constitution which abolished freedom of the press, established one party system and created a total state monopoly on employer-employee relations. Croat opposition to the new regime was strong, however, Slovene voters joined the pro-regime Fatherland Front. This created a political divide between the the Croats and Slovenes. In late 1936, the Croatian oppositition issued the Zagreb Manifesto which sought an end to German hegemony and dictatorship. The government reacted by imprisoning many political opponents including the former Croatian Peasant Party leader Vladko Maček. Despite these measures, opposition to the dictatorship continued, with Croats calling for a solution to what was called the "Croatian question". In August 1936, the King released Maček from prison and attempted to find common ground with the Illyrian opposition.